Conservative Austerity and the Future of Local Government – 1

Introduction

This briefing is the last of a series on the impact of central government cuts to local authorities. The first was written in 2012 to assess the original programme under the Conservative/Liberal Democratic coalition, and the second in the run-up to the General Election of June 2015. While the previous briefings focused on the Bradford district, this takes a broader perspective on the Conservative government’s autumn statement and funding allocations to local authorities nationally, while retaining reference to Bradford as a local focus.

The picture is one of deep cuts to central government funding, with major impacts on the provision of services and on council jobs. As a result of the autumn statement and revised allocations, particularly the phasing out of central government grant, the next swathe of cuts will be even more draconian than previously anticipated.

By 2020, anything recognisable as local authority provision across a range of public services will have been severely curtailed or simply ceased to exist. This is not inevitable. The English metropolitan authorities have a democratic mandate to preserve services that are highly valued by their local communities. Rather than carry out Conservative austerity policies, there should be a national campaign based on an alternative, no­cuts budget and direct action to preserve existing jobs.

We are now half way through a ten-year programme of austerity that was always intended to bring about a fundamental, and for Conservative ideologues, irreversible shift in the structure of the British state. Perhaps it is worth reflecting, briefly, on the rationale. According to the Conservative mantra at the time of the 2010 election, the finances of the country had been left in a parlous condition by the policies of the Labour government that had recklessly accumulated public debt through borrowing on an unprecedented scale. Without radical reform the country faced collapse as international debt repayments became unsustainable.

This takes no account of the fact that the recession was caused by the major US and UK financial institutions through an orgy of speculation which spiralled out of control. The Labour government (and the Obama administration in the United States) had to intervene on an unprecedented level, pumping billions of pounds directly into those institutions, or face a potential banking collapse and world­wide depression.

But that mantra is now the dominant political narrative – excessive public expenditure, caused by an irresponsible Labour government, had to be brought under control through painful but necessary cuts to services and to the welfare state, even though they hit the poor and disadvantaged the hardest. Any alternatives put forward to protect public services through progressive policies such as tackling the scandal of corporate offshore tax havens, or the extension of the time­period for debt repayment to take advantage of historically low interest rates, were effectively drowned out under a cacophony of right­wing media propaganda. Austerity, in effect, became the legitimation for a sustained ideological attack on the public sector, with the objective of reducing its role in the economy to a level lower than at any time since the 1930s.

By 2015 the pattern of the cutbacks was clear, both at a national and local level. Overall, central government funding to local authorities fell by nearly £12 billion between 2010-­2015 and just under 500,000 staff were made redundant. To make matters worse, the local authorities with the highest levels of deprivation, and more reliant on central government grants, were relatively worse off. Cuts to the poorest metropolitan districts averaged 28% compared to the more affluent authorities. National reviews painted a stark picture of closures and restrictions to services.

According to Unison, 476 libraries had closed, Sure Start children’s centres were cut from 3,632 to 578, and 300 youth centres closed. AGE UK estimated that the number receiving home care fell by 31% from 543,000 to 371,000. Day-care places number receiving home care fell by 31% from 543,000 to 371,000. Day-care places were reduced by 67% from 178,000 to 59,000 and the number receiving meals on wheels fell from 81,000 to 30,000.

The other major impact was through what was described as prioritisation of services but might more accurately be called rationing. The number of local authorities restricting eligibility for social care to those classified as in substantial or critical need had risen from 75% to 85%. Also, charges were made for services previously provided without cost. Over three­quarters of children’s centres that offered services of between 32­40 hours a week now only did so for between 5 and 20 hours a week.

Many libraries and youth facilities that nominally remained open only did so through volunteer workers. Other examples could be provided to confirm the direct and immediate impact of the cuts, despite the claims of the government and, sadly, some local authority representatives, that the focus was on ‘efficiency savings’ such as reducing back office costs.

Bradford’s situation closely mirrored this national pattern. As one of the metropolitan authorities with the highest levels of deprivation, the district was dependent for 62% of its funding on the central government formula grant. During the period 2010­2015, this was cut from £308.7m to £204.9. While other sources of funding were expected to provide compensation, the estimates of their value were consistently downgraded. For example, the council had budgeted £15 million from the government’s Better Care Fund in 2015 to assist social care but the figure was reduced to £5 million. Similarly, the council had to plan for a cut in public health funding of £2 million compared to the original estimate. As far as the workforce was concerned, the council had cut over 2,000 jobs, with a further 560 planned for 2015­16, about a third overall of the workforce in 2010.

Despite local variations, then, the general picture was very clear. While claiming to make efficiency savings, local authorities were cutting front­line services and desperately attempting to maintain their statutory provisions in adult and children’s services, as well as some administrative functions like planning, with reduced staff numbers. What were now described as discretionary or non­essential services were either closed or cutback steeply with alternative provision sought, either through the private sector, through community sector organisations and in some cases, such as libraries, through community groups and volunteers.

Autumn Statement – November 2015

The Chancellor’s autumn statement initially caused confusion because it seemed to signal a slowing in the pace of the cuts. Tax credits were restored temporarily, and the police budget maintained. But this did nothing to disguise the real agenda of the new Conservative government to further reduce public spending as a proportion of Gross Domestic Product (GDP) and to accelerate the cuts to services, with local authorities the main target. What is most striking is how the central government grant will be phased out, although the government stressed that compensatory sources of funding would be available.

The fundamental changes are that local authorities will retain the whole of revenues from business rates; have the powers to raise a new form of council tax precept exclusively for social care; and will be able to retain all funds raised from the selling of assets, either land or property. But the idea that local authorities are being devolved greater powers would be laughable if it were not so perverse.

Details of the new funding arrangements are difficult to calculate because of the complexities and uncertainties over the transition process. The gap between the elimination of the central government grant and these new funding sources will certainly run into billions of pounds and may even be greater over the next five years, in real terms, than the £12 billion cut that the local authorities experienced between 2010-­15.

Those local authorities with major issues of deprivation and poverty will be the ones that face the greatest challenge since the new arrangements will make that gap between the poorest and richest authorities even wider. Firstly, of course, the volume of business rates that can be generated will be higher for the more affluent areas. Although there will be some redistribution of business rates revenues to take account of the needs of poorer authorities, they will still have to raise a higher rate in order to provide the same level of services as those with a stronger business base.

Similarly, the potential revenues from asset sales will be greater in more affluent areas, such as prime development land in the South East. Rather than increase business rates, poorer authorities may actually feel compelled to reduce them or risk losing businesses to other areas with lower business rates. In other words, there is a real risk of a race to the bottom through the new arrangements for local government ‘autonomy’. Also, there is no consideration of the implications of any future recession where revenues fall steeply without compensatory, central government support.

The response of Bradford Council to the autumn statement was typical of the English metropolitan districts, with a revised budget that planned for much steeper cuts than previously anticipated. Over the next two years, instead of £27.4m in cuts, the council will have to find an extra £53m. The funding gap in 2016-­17 and 2017-18 will be, respectively, £45.1m and £30.7m. As a result the council will make another 640 staff redundant; reduce the numbers delivering adult social care; slash the number of council­ run libraries from 32 to 7, with the others run on a voluntary basis where possible; end council funding for Police and Community Support Officers; reduce the bin collection from once a week to every fortnight, and introduce a fee for green recycling.

While the full impact over the period 2015­2020 is yet to be assessed, a realistic estimate based on existing trends would be that, in real terms, the council budget will have been cut by over 50% compared to 2010 when the austerity programme was initiated, and the workforce will be around 45% of 2010 levels. It is no surprise that the leader of the Labour group commented, after the impact of the autumn statement had been assessed, that Bradford council will simply be reduced to providing the minimum statutory services.

The Historical Context of Local Authority Funding

Faced with the present assault by the Conservatives, it would be easy to conjure up a mythical ‘golden age’ of local government. But the reality is one of peaks and troughs of expenditure, and of serious crises, like the cutbacks during the 1980s recession and the imposition of the disastrous poll tax. Local authorities struggled to maintain basic services during those periods but also enjoyed other periods where spending increased. The key, defining limitation, compared to local government in most other European countries that have the powers to raise revenues independently, has been the over­dependence on central government grant allocations and vulnerability to national policy changes.

Yet, throughout the post­war period, there was always a sense that local authorities represented the best of our democratic values: building council housing that ended the scourge of slum properties; supporting the most disadvantaged and vulnerable people in society such as the elderly in need of care; and building community centres, libraries and leisure facilities that were accessible to every one, irrespective of the ability to pay. Local authority staff, in return for providing those services, could rely on security of employment, and basic entitlements to pensions, holidays and sickness pay.

What has become increasingly clear is how Conservative ideologues, who have nothing but contempt for the concept of public provision, are using the spectre of austerity to systematically dismantle this post­war legacy. The first phase of the project acclimatised people to the idea that any form of local public service was simply a drain on resources and that the cuts were a necessary means of instilling efficiency and eliminating waste.

Now we are entering the second phase of prioritisation. Local authorities, faced with impossible choices, have to focus on social care and children’s services as statutory responsibilities. All the other valued services are relegated to the description of either discretionary or optional, condemning them to an inevitable process of decline and closure.

The desperate search for cuts has led to privatisation and with it, job insecurity for workers on temporary or zero­-hour contracts. Alternatively, provision is dependent on community associations that, historically, received the bulk of their funding from local authorities and are now poorly resourced and run by a skeleton staff aided by volunteers. As local authority support is finally withdrawn they are left clinging onto a severely reduced service provision and condemned to the annual torment of charitable funding applications.

The ultimate perversion is how the new funding arrangements are being sold as greater autonomy for local authorities. Central government grant is being phased out to be replaced by new powers for business rate retention and a social services council tax. This has been rightly described as the strategy of ‘blame diversion’.

When the ordinary council tax, the new social services council tax and business rates are all raised to recover some of the funding that has been taken away, and local people complain of increased taxation for reduced services, the Conservative government will simply wash its hands of any responsibility. It will argue that these arrangements for the destruction of local government represent local autonomy. The final phase up to 2020 will be to make these cuts seem irreversible, as the basic infrastructure of both physical resources in buildings and land, and more importantly, a critical mass of skilled workers disappears. There will be ever more desperate attempts to maintain financial viability through a fire sale of assets and the use of financial reserves. This isn’t selling off the family silver to pay the bills, this is ripping out the plumbing in the hope that you can get enough drinking water from rain falling through holes in the roof.

Even, then, the financial viability of local authorities may be in doubt since there will be mounting pressures, such the costs of implementing the living wage for the remaining workforce and for services provided by the private sector such as social care, as well as increased demands for statutory services from a growing population. The prospect of some local authorities being declared financially insolvent by 2020 cannot be ruled out.

Is there an alternative to the politics of austerity? So far Labour administrations around the country have implemented every round of budget cuts. The default position has been one of containment, criticising the government for undermining provision by slashing central grants, while claiming that front­line services have been protected from the worst of the cuts through efficiency savings. While understandable, this strategy rested heavily on the return of a sympathetic Labour government in the 2015 general election. It also had the damaging political effect of allowing the Conservatives to claim that local government had been wasting resources, and that further efficiencies could always be found, even though front­line services had been badly affected from the very outset.

The Autumn Statement has exposed the total failure of that strategy and how, despite a local democratic mandate to maintain services, Labour administrations will be made responsible for dismantling them. On previous experience, they will argue that they have been put in an impossible position but will implement a cuts budget while doing everything they can to maintain their statutory responsibilities. The language is of new forms of ‘smarter’ local government, particularly the need to work in partnership with other providers like the NHS and with the private sector.

This is nothing more than a public relations gloss on a political disaster. Whatever the individual consciences of councillors and their personal anguish at being put in the position of implementing further and deeper cuts, they will be collectively voting for the destruction of local government on a scale that is becoming irreversible. This is a form of institutional complicity and a betrayal of thievery people that they have a political and moral duty to represent.

Here is the crux of the issue. Whether to refuse to implement a cuts budget and risk takeover by central government administrators, or even face the threat of legal action against individual councillors through a surcharge. According to Labour leaders, such an outcome would be a disaster for local government and an abrogation of their duties as councillors.

But there is nothing that government­ appointed administrators could do that would be worse than the cuts programmes to be carried out over the next five years. Nor should the threat of individual surcharges be taken seriously since this only applies to cases where councillors have used public resources recklessly or for personal advantage.

Instead of meekly accepting their fate, Labour councils could use their collective strength to fight back. From the London inner ­city boroughs, to Birmingham and the Midlands, to Leeds, Manchester, Liverpool, and on to Newcastle, a co­ordinated campaign could create a national political momentum that challenges austerity cuts.

A clear alternative is the experience of Scotland and Wales where devolved government has provided some protection to local authority spending, although difficult choices still remain. Also important have been the actions of individuals, such as the Green councillors who resigned from senior positions on Norfolk County Council in December 2015, rather than be made responsible for the next round of cuts.

One notable historical precedent of an effective political campaign was in the early 1920s when the Poplar borough council, led by the great Labour politician George Lansbury, refused to set an increased level of rates because it would hit the poorest people in the borough the hardest. They did not seek a confrontation with the government but, in this case, councillors were prepared to go to prison because they believed that the rates settlement was deeply unjust and they had a had a local mandate to protect people living in poverty and deprivation. As a result of a concerted and widely ­supported campaign, the councillors were freed and the rates system in London rebalanced so that Poplar could retain funds that were previously redirected to more prosperous boroughs.

Austerity is a matter of political choice and not economic necessity. At the same time as the Conservative government announced the next round of local authority cuts, it also made a commitment to raise the Ministry of Defence’s budget to 2% of GDP. The accumulated increase of £12 billion over the next five years is almost identical to the resources lost by local authorities during the same period.

The fundamental issue is what we believe are the priorities for public expenditure. Local government should be celebrated rather than vilified because it represents the best of what it means to live in a decent society and because the consequences of its destruction are simply too appalling to contemplate.

Do we really want to see the remaining local authority workforce demoralised by successive rounds of redundancies and privatisations; our parks run down and neglected; libraries and community centres that act as a lifeline for people in some of our most deprived neighbourhoods closed; old people forgotten and abandoned, unable to pay towards care costs and left to die cold and alone, buried in paupers graves? Or do we have the political will to fight back?

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Short Bibliography

Age UK, ‘Care in Crisis – What’s Next for Social Care?’ (Age UK, 2014)